Question: Bank 1 can issue five-year CDs at an annual rate of 11 percent fixed or at a variable rate of LIBOR + 2 percent. Bank

Bank 1 can issue five-year CDs at an annual rate of 11 percent fixed or at a variable rate of LIBOR + 2 percent. Bank 2 can issue five-year CDs at an annual fixed rate of 13 percent or at a variable rate of LIBOR + 3 percent.
a. Is a mutually beneficial swap possible between the two banks?
b. What is the comparative advantage of the two banks?
c. What is an example of a feasible swap?

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